Global financial services company, Circle, announced today the expansion of their international digital asset offerings with the launch of a new subsidiary in Bermuda. The Bermuda government has provided the company with a “Class F” license under their Digital Assets Business Act of 2018 (DABA), making Circle the first major cryptocurrency exchange and wallet service ever to receive such a permit.
“We’ve always been advocates for forward looking regulatory clarity on digital assets. That being said, we’ve been searching the world for jurisdictions that met our criteria, but that were also deeply focused on regulatory compliance. We evaluated a number of places to base our international operations in and Bermuda was a perfect fit. Under the DABA license, Circle will be able to operate a suite of regulated crypto financial services for our international customer base, including expanded digital asset product offerings,” Gus Coldebella, Circle’s chief legal officer, told me.
Circle, which has raised about $250 million from investors including Jim Breyer (Facebook), Goldman Sachs, and IDG Capital (Baidu, Tencent), serves over eight million customers globally. Circle’s crypto-trading desk provides one of the largest global liquidity pools for digital asset trading, averaging $2 billion in monthly volume. In addition, Circle has developed working partnerships with regulators, paying close attention to guidance from the U.S. Securities and Exchange Commission (SEC).
Yet while Circle has proven to be an impressive financial services company that plays by the books, many governments remain hesitant to outline regulatory requirements for digital assets and cryptocurrencies. In turn, growth for these offerings has been hampered. For instance, Facebook’s newly announced Libra token is facing harsh criticism from the U.S. congress.
Bermuda, however, hopes to pave the way for cryptocurrency and digital asset innovation with their regulatory framework, specifically through the Digital Assets Business Act of 2018. In a nutshell, DABA provides a comprehensive framework for the regulation and oversight of crypto financial services, including digital asset issuance, sale and redemption, exchange operations, and custodial services.
“Unlike other jurisdictions that have attracted crypto companies, Bermuda’s regulatory framework simultaneously embraces the unique nature of crypto assets, while maintaining their position as one of the strongest FATF-compliant AML/CFT regimes in the world. It is the case that Circle is the first, full service crypto finance company with a trading desk, stable coin and of course an exchange to be granted a ‘class F’ license, which is a full license, not restricted to a specific time period,” explained Coldebella.
Moreover, Circle obtaining a Class F license also demonstrates how Bermuda may be able to capitalize on the increasingly uncertain regulatory environment for cryptocurrency and digital assets in the U.S. and globally.
According to the Honorable Premier David Burt, a Bermudian government official working with closely with Circle, he believes this relationship will open the door to more growth and innovation moving forward.
“We look forward to working closely with Circle and other key stakeholders who have chosen Bermuda to leverage our small size, top tier infrastructure, progressive government and competent regulator to respond quickly and prudently to the needs of the industry. We believe we have established a top standard of regulatory confidence which will help guide other jurisdictions on how to appropriately manage the risks associated with this industry while reaping the rewards offered by the efficiencies and opportunities that will be driven by the digitization and democratization of finance,” the Honorable Burt told me.
It’s also important to point out that while there are a number of Asian and European countries innovating in this space, Bermuda’s Digital Asset Business Act is unique because it recognizes digital assets as a new class of assets that cannot be placed within already existing legacy regulatory frameworks.
“We look at tokens and token projects as an interesting experiment that approach the creation of the ‘internet of finance.’ We want to innovate safely and in full compliance with the law in which our projects operate, which requires clarity of laws. For instance, it is often the case that a token functions as a currency, but also has characteristics of say a commodity or an investment contract.
This same token may exhibit different characteristics, either simultaneously or at different points of its life cycle in which it is used. Because these are innovative products, there needs to be some regulation that acknowledges this. Generally speaking, Bermuda has taken a huge step forward in recognizing that this is possible, which is why they created the Digital Asset Business Act,” Sean Neville, co-founder and co-CEO of Circle, told me.
And while the Bermuda regulatory framework enables technical and business innovation, it also enforces high regulatory and supervisory standards. DABA protects customers with stringent requirements for managing enterprise, cybersecurity and custody risks.
The framework also actively guards against international criminal activity with the one of the strongest regimes in the world for anti-money laundering (AML) and combating the financing of terrorism (CFT) in ways that are compliant with Financial Action Task Force (FATF) standards.
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